Is the market over reacting?

ADSL South Africa (Broadband South Africa), 7 January 2008

This is the question one can ask after Telkom’s share price came crushing down with over 40% from a high of R190.99 last year. This is even when one takes into account overall negativity on world markets.

Telkom’s share price started it’s sharp decline shortly after the company withdrawn a cautionary announcement at the end of October last year which effectively meant the end of talks with MTN. This must be an indication that the market has not been very happy that talks ended. ADSL South Africa (Broadband South Africa) believes this is mainly due to speculative investors who pushed the share price upwards when talks started and decided to sell when talks broke down. They were hoping to cash in when MTN buys part of Telkom’s fixed-line business or when Telkom sells its stake in Vodacom. The end of talks effectively crushed the hopes of investors to receive a big fat cash bonus soon.

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